3M announced that it has entered into a definitive agreement to acquire Acelity Inc. and its KCI subsidiaries worldwide from a consortium comprised of funds advised by Apax Partners (the Apax Funds), together with controlled affiliates of Canada Pension Plan Investment Board (CPPIB) and the Public Sector Pension Investment Board (PSP Investments) for a total enterprise value of approximately $6.7 billion, including assumption of debt, subject to closing and other adjustments. Acelity is a global medical technology company focused on advanced wound care and specialty surgical applications marketed under the KCI brand.

The Acelity business is well known for creating and growing new segments based on the ability to identify and address unmet clinical needs with KCI-branded products that advance the practice of medicine, beginning with the introduction of V.A.C. Therapy—groundbreaking Negative Pressure Wound Therapy. Today, the KCI product offering also includes advanced wound dressings and negative pressure surgical incision management systems. KCI’s solutions contribute to better health outcomes by enhancing wound healing. Acelity had 2018 revenues of $1.5 billion.

On a GAAP reported basis, 3M estimates the acquisition to be $0.35 dilutive to earnings per share in the first 12 months following completion of the transaction, including financing costs. Excluding purchase accounting adjustments and anticipated one-time expenses related to the transaction and integration, 3M estimates the acquisition to be $0.25 accretive to earnings per share over the same period.

The effective enterprise value multiple is approximately 11 times estimated annual adjusted EBITDA for the first 12 months following completion of the transaction, including expected run rate cost synergies.

As a result of this announcement, 3M now expects full-year 2019 share repurchases to be in the range of $1.0 billion to $1.5 billion versus $2.0 billion to $4.0 billion previously.

The transaction is expected to close in the second half of 2019, subject to customary closing conditions and regulatory approvals. 3M will finance the transaction with a combination of available cash and proceeds from the issuance of new debt.

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